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Digesting the Budget

David Kitson

10 March 2017

Wilkins Kennedy’s Budget Lunches are very well established here in Hertfordshire and have continued to take place over many years. Our final Spring event on Thursday lunchtime truly marked the end of an era – but it will pave the way to our new Autumn Budget events, watch this space for more information coming soon.

Due to the longevity of these events, we have a very loyal following and the numbers swell every year. At our most recent event, we were lucky to welcome more than 90 individuals who made up a number of business owner-managers from around East Hertfordshire. The venue was familiar hunting ground too – the Three Lakes Restaurant at Westmill Farm in Ware.

Even though the Chancellor’s Budget was a little thin on the ground in terms of delivery, there were still a few things to digest with our lunches. It also provided a good chance to remind our audience about any last-minute tax planning for year-end before April comes around.

My colleague Tony Healey began the presentation rounds and covered off the changes to NICs and dividend allowances. These have hit the headlines recently under perceived “attack” on the self-employed, but looking at the sums, hopefully the damage will be limited.

The Government will introduce an increase in Class 4 NIC for self-employed will increase from 9% to 10% in April 2018 and then to 11% in 2019. If we look at a basic example using the figures from 2015/16 vs 2019/20, over 3 self-employed income levels; If you have a profit of £25,000 you will save £159 per year. A profit of £50,000 will save you £347 a year and a profit of £150,000 will cost you £240. The National Insurance cost is absorbed to some extent by income tax savings, meaning only the higher earners will be worse off. However, there is also a further blow to those with dividend income up to £5,000 in the form of the dividend tax-free allowance, which has been reduced to £2,000 per tax year from April 2018.

Tony also covered the changes relating to Making Tax Digital – a scheme that was proposed by Government to simplify reporting and help close down evasion loopholes. The Chancellor announced in the Budget that Making Tax Digital will now be delayed for business turning over less than the VAT threshold for one further year.

My own presentation refreshed the new legislation surrounding mortgage rate relief for property investors. This will be phased in over four years from April 2017 and it will mean that landlords who have loans secured on their properties, such as a mortgage, as well as any associated fees, will only be able to claim basic rate tax relief. This could have a severe effect for those with larger property portfolios, and/or those who are higher rate taxpayers, some may even see negative property margins. For those people, I would urge you to contact us at Wilkins Kennedy as we can advise you with the best way to mitigate this risk going forward.

If any of the changes announced in today’s Budget will affect you, or you have any question relating to effective tax planning then please do contact us. We will also be keeping you updated on any future events via our events page.

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